COMMISSIONER OF INCOME TAX Vs. GANESH SOAP WORKS

JUDGEMENT

(1.) THIS is an application under S. 256(2) of the INCOME TAX ACT, 1961 (hereinafter referred to as "the Act").

(2.) THE material facts giving rise to this application, briefly, are as follows: While framing the assessment of the assessee for the asst. year 1977 -78, the ITO disallowed the claim of the assessee for a sum of Rs. 54,861 on account of commission charges paid to Ganesh Sales Agency whose proprietor was the wife of one of the partners, of the assessee -firm. The ITO found that the payment of commission to the wife of one of the partners of the assessee - firm was fictitious. On appeal, the CIT (A) affirmed the order passed by the ITO in this behalf and held that no part of the commission paid by the assessee to Ganesh Sales Agency could be allowed as a deductible business expenditure. On further appeal before the Tribunal, the Tribunal affirmed the finding that the payment of commission to Ganesh Sales Agency could not be allowed as a deductible business expenditure. The Tribunal, however, held that the legitimate expenditure incurred by Ganesh Sales Agency deserved to be allowed. The Tribunal, therefore , remanded the case for ascertaining that amount. Aggrieved by the order passed by the Tribunal, the Revenue sought a reference, but as the application for making a reference was rejected, the Revenue has filed this application.

(3.) THE application is, therefore, allowed. The Tribunal is directed to state the case and to refer the aforesaid question of law to this Court. The parties shall bear their own costs of this application.